Waste, of both resources and products, is an unfortunate part of business that every industry must contend with. For logistics, the concept of wastage is similar to other trade arenas, if slightly more complicated to identify and explain. Where wastage in a tire factory may refer to raw materials accidentally damaged or used to produce unusable finished products, the idea of waste in logistics is compartmentalized into about eight key areas to help define intangible wastes that cost supply chain managers as much, if not more, than tangible wastage occurring in other industries.
Overproduction is an area of waste that is clearly definable in most industries: goods produced in excess are easily quantifiable and visible. In logistics, the principle is essentially the same – overproduction occurs where cargo is delivered to a client before it is needed, necessitating additional storage measures, or delivered in quantities exceeding those requested.
As the receiving party, supply chain managers identify such waste in terms of inventory. Where inventory is delivered to a warehouse in excess of warehouse capacity or too far ahead of schedule to be useful, this is considered a waste of inventory that could trigger loss of valuable resources such as storage space or even money used to find alternative warehousing for inventory.
Related to this, is wastage of space in warehousing and transportation. Here, space is utilized in a way that is far from optimum: boxes or crates are not filled to capacity, trucks set for delivery are improperly loaded leaving blank space that could have held more cargo. This is one of the key causes of the fourth type of waste, which is waste of human resources. Any activity leading to the use of human resources for purposes outside those directly beneficial to the company is considered waste. Such purposes that fall outside the normal and beneficial scope include correcting unnecessary errors, such as poor space management.
Lead time is another type of waste in logistics. This refers to the wasted time between cessation of one scheduled activity and the beginning of the next. An example of this would be excessive time being taken between loading a truck and the truck setting off for deliveries, thereby delaying subsequent activities, or lapse of time between cargo being delivered to a warehouse and being properly received, labeled and stored as needed. A related waste that may also cause lead time waste is system complexity. Here, there exists a mismatch between supply chain management systems in use and the actual needs of the company. This often means systems are difficult to use and cause delays as employees struggle to operate them, e.g. a receiving process that is convoluted may encourage delays in cargo being stored to the benefit of the warehouse.
System incompatibility may also encourage the next type of waste: errors. This is any activity causing reworks, unnecessary adjustments or returns. Such errors occur as a result of mislabeled products, paperwork such as inventory records incorrectly filled and so on. These errors usually result in waste of human resources or even more critical, conveyance waste. This can be classified as any unnecessary transportation resulting in additional costs to the firm.
Aside from unscheduled stop offs and redundant routing, conveyance waste can also occur internally, where fast moving goods are stored in distant reaches of the warehouse, necessitating extra transportation as opposed to those stored in easily accessible areas close to the loading bays.
Having identified these key ways in which logistics firms incur waste, both financial and those not directly related to money, supply chain managers can work to reduce or eliminate such losses, effectively sealing the leak of precious limited resources to the benefit of the company.